The yen has outperformed amid nervous global markets, though concurrent dollar strength has seen USD-JPY lift back above 107.00 from a 106.76 low. The commodity and most developing world currencies remained under pressure. AUD-JPY dropped to a new 11-year low, and AUD-USD posted a fresh 17-year low. The MSCI Asia-Pacific (ex-Japan) equity index to its lowest level since late 2016, while most benchmark national European stock indices racked up losses of 5% or more, and S&P 500 futures went limit down. Oil prices dove again amid a widening demand and supply gap, with global coronavirus-related lockdowns eroding demand while Saudi Arabia is ramping crude production. WTI futures dove over 6% in hitting a 17-year low at $25.51. USD-CAD, which has a strong negative correlation with oil prices, rallied to a new four-year high at 1.4345. The dollar has overall remained firm, with demand for cash dollars remaining high while some traditional safe haven assets, such as gold and U.S. Treasuries, have remained under pressure as investors rebalance portfolios and build cash cushions to cover margin calls. U.S. bonds have been falling despite the Fed buying up to $40 bln worth daily in its revamped QE program. Some market narratives are also pointing to concerns about the U.S. fiscal position light of the U.S. government's announcement for a $1 tln stimulus package. Gold prices fell 2%, though have so far remained off the three-and-a-half-month low seen on Monday. The narrow trade-weighted USD index (DXY) printed a high at 99.91, which matches the four-year high seen on February 20th. Regarding the coronavirus, the concern is that massive global fiscal and monetary stimulus measures, even when targeted well, will simply not be able to fully mitigate the impact of draconian lockdowns in an increasing number of economies. Investors are also faced with uncertainty about how low the virus crisis will last.

[EUR, USD]EUR-USD has remained heavy but has so far remained shy of the three-week low seen yesterday at 1.0956. Demand for cash dollars have remained strong, and we anticipate this to remain the case. There is a lot of stress in the investor community, who are re-balancing portfolios and some having to pay margin calls. As we had been noting, recent gains in EUR-USD were not, in our opinion, the start of a bullish trend. The Eurozone is facing serious issues with both Italy and Spain amid nationwide lockdowns in the face of sharp rises in coronavirus cases. Some Italian banks at risk of failing, which threatens to hit the Eurozone financial system hard. This evolving backdrop should keep EUR-USD capped even as the coronavirus situation worsens in the U.S.

[USD, JPY]The yen has outperformed amid nervous global markets, though concurrent dollar strength has seen USD-JPY lift back above 107.00 from a 106.76 low. The commodity and most developing world currencies remained under pressure. AUD-JPY declined by nearly 1%, though has so far remained above the 11-year low seen yesterday. Stock markets turned lower during the Asian afternoon session, which drove the MSCI Asia-Pacific (ex-Japan) index to its lowest level since late 2016, while most benchmark national European stock indices racked up losses of 5% or more, and S&P 500 futures went limit down. How successful the policy responses will be in the face of coronavirus lockdowns and the like remains to be seen. It's seems clear now that there won't be a V-shaped recovery in markets and economic activity, similar to that seen in Asia during the 2003 SARS episode, as the coronavirus has proved much more adept at spreading exponentially than the SARS virus of 2003 did. The hope now is for a U-shaped recovery, and the fear is a L-shaped eventuality. We expect USD-JPY's directional bias to remain to the downside, anticipating sub-100.00 levels.

[GBP, USD]The pound has been trading in a distinct pattern during heightened phases of risk-off positioning, when it underperforms its major currency peers, including the dollar, euro, Swiss franc, and yen, while still gaining against the dollar bloc, and other commodity currencies and most developing world currencies (i.e. currencies with high beta characteristics). This pattern is likely to remain the case while risk aversion persists in global markets. Last week¡s 50 bp BoE rate cut and the government announcement of a massive GBP 30 bln fiscal spending plan didn't have much impact on the pound. The government has since followed up with the announced of GBP 330 bln rescue package for businesses threatened by the economic disruption caused by the coronavirus. The reason that Her Majesty's currency tends to find itself on the underperforming list of currencies during protracted periods of risk-off positioning in global markets is a consequence of the UK's dependence on foreign investment to fund its current account deficit. Despite the Fed's massive 100 bps emergency rate cut, Cable printed a fresh six-month low at 1.2004, with the desire for cash dollars remaining intense (investors are shunning even gold for a second consecutive week). Regarding the BoE, new government Andrew Bailey picked up the reins on Monday. His first Monetary Policy Committee meeting as governor will be on Wednesday and Thursday next week (announcing March 26th). A further 25 bps cut looks likely, which would take the repo rate to zero. An expansion in the QE program also looks likely.

[USD, CHF]EUR-CHF has settled back under 1.0600, but remains above the five-year low that was seen on Monday at 1.0505. Safe haven demand for the Swiss currency has returned amid heightening concerns about the global economic disruptions being caused by efforts to contain the coronavirus. The U.S. in January added Switzerland to its list of currency manipulators. The move seems a bit rich given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argues that Switzerland needs a more expansive fiscal policy.

[USD, CAD]USD-CAD, amid its biggest monthly gain since January 2015, remained buoyant today but still held below the four-year high seen yesterday at 1.4276. WTI oil prices hit a new major-trend low at $26.63, which is the lowest nominal level traded since May 2003. The Canadian dollar and other dollar bloc currencies have been underperforming amid the recent backdrop of acute risk-aversion in global markets. Sustained declines in oil prices erode Canada's terms of trade, which is the causation link of the Canadian currency's correlation with crude markets. The Canadian dollar will remain subject to volatility and overall underperformance as long as the coronavirus contagion remains in a state of increasing spread.